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Ameriquest finalizes $325 million settlement, reports say

January 23, 2006

Subprime lender accused of deceiving borrowers

Inman News

Ameriquest Mortgage Co. has finalized a $325 million settlement of allegations that it deceived borrowers, falsified loan documents and pressured appraisers to overstate home values, the Los Angeles Times reported Saturday.

A task force of 49 states and the District of Columbia plans to announce today that the Orange County-based company and two affiliates -- all specialists in higher-cost mortgages to borrowers unable to qualify for bank loans -- agreed to overhaul their lending practices, the Times reported.

Industry experts told the Times the deal could in effect force rival lenders in the higher-cost loan market to adopt similar standards to avoid legal challenges from both regulators and consumers. These loans have been the fastest-growing segment of the mortgage market and now account for an estimate of approximately 20 percent of all such lending, the Times reported.

Settling the case also is expected to clear the way for Ameriquest's founder, Los Angeles billionaire Roland E. Arnall, to become the U.S. ambassador to the Netherlands, reports said.

The settlement is expected to be disclosed by California Attorney General Bill Lockyer, Iowa Attorney General Tom Miller and others at a Los Angeles news conference Monday, the Times reported.

According to people familiar with the agreement, key provisions will include appointment of an independent monitor to ensure compliance, and new rules forcing loan agents to give better disclosure of mortgage terms to customers throughout the approval process, media reports said.

Under the reported deal, hundreds of thousands of customers could be eligible for refunds.

According to media reports, the reported agreement would also:

• Prohibit Ameriquest from offering incentives that might encourage loan officers to unfairly impose higher fees, closing costs or early payoff penalties on customers.
• Ban "unreasonable" sales quotas for loan officers, and bar regional loan supervisors from setting quotas that exceed those set by corporate headquarters.
• Centralize property appraisals so that loan officers can't influence appraisers to inflate home values, and require the use of outside agents to close mortgages to ensure borrowers aren't pressured by their loan agent into signing final papers.
• Ban Ameriquest or its employees from colluding with debt collectors to pressure borrowers into refinancing.

The settlement would be the second largest to date involving a mortgage loan company, after a $484-million pact signed by Household International and 50 states in 2002, the Times reported.

"This agreement is good for consumers and good for the company," Ameriquest said in a statement Friday, according to the Times. "We worked closely with the states to address their concerns. These improved business practices will enhance our ability to serve our customers."

The agreement is expected to apply to all states except for Virginia, where Ameriquest does not operate, media reports said.

The settlement terms are designed to address a variety of allegedly improper lending practices detailed in a series of Los Angeles Times articles in the last year.

In those Los Angeles Times stories, former and current employees alleged that top-down pressure to boost loan sales created a "boiler room" atmosphere where workers forged documents, misled borrowers about rates and fees and inflated borrowers' incomes and home values to qualify them for loans they couldn't afford.

Copyright 2006 Innam News